CALCULATION OF REGISTRATION FEE
| Title
of Each Class of |
Maximum
Aggregate |
Amount
of |
| Notes |
$2,780,000 |
$322.76 |
| Pricing
supplement no. 1604 |
Registration
Statement No. 333-155535 Dated September 15, 2011 Rule 424(b)(2) |
| Structured |
$2,780,000 10.30% per annum Auto Callable Yield Notes due September 24, 2012 Linked to the Lesser Performing of the S&P 500® Index and the Russell 2000® Index |
||
General
- The notes are designed for investors who seek a higher interest rate than the current yield on a conventional debt security with the same maturity issued by us or an issuer with a comparable credit rating. Investors should be willing to forgo the potential to participate in the appreciation of either the S&P 500® Index or the Russell 2000® Index and to forgo dividend payments. Investors should be willing to assume the risk that they will receive less interest if the notes are automatically called and the risk that, if the notes are not automatically called, they may lose some or all of their principal at maturity.
- The notes will pay 10.30% per annum interest over the term of the notes, payable quarterly at a rate of 2.575% on each of the four (4) interest payment dates. However, the notes do not guarantee any return of principal at maturity. Instead, if the notes are not automatically called, the payment at maturity will be based on the performance of the Lesser Performing Underlying and whether the Index level of either Underlying is less than its Starting Underlying Level by more than the Protection Amount at any time during the Monitoring Period. Any payment on the notes is subject to the credit risk of JPMorgan Chase & Co.
- The notes will be automatically called if the closing level of each Underlying on any Call Date is greater than the applicable Starting Underlying Level. If the notes are automatically called, payment on the applicable Call Settlement Date for each $1,000 principal amount note will be a cash payment of $1,000, plus any accrued and unpaid interest, as described below.
- Senior unsecured obligations of JPMorgan Chase & Co. maturing September 24, 2012*
- The payment at maturity is not linked to a basket composed of the Underlyings. The payment at maturity is linked to the performance of each of the Underlyings individually, as described below.
- Minimum denominations of $1,000 and integral multiples thereof
- The terms of the notes as set forth in “Key Terms” below, to the extent they differ or conflict with those set forth in the accompanying product supplement no. 192-A-III, supersede the terms set forth in product supplement no. 192-A-III. In particular, we will not have the right to call the notes, in whole or in part, at our option on any Optional Call Date, as described in product supplement no. 192-A-III. Instead, the notes may be automatically called as described under “Key Terms — Automatic Call” below. In addition, the interest rate and the interest payment will be determined as set forth below under “Key Terms — Interest Rate” and “Selected Risk Considerations — Quarterly Interest Payments” and not as set forth in product supplement no. 192-A-III. Please refer to “Supplemental Terms of the Notes” in this pricing supplement for more information.
Key Terms
| Underlyings: |
The S&P 500® Index and the Russell 2000® Index (each an “Underlying,” and collectively, the “Underlyings”) |
| Interest Rate: |
10.30% per annum, payable quarterly at a rate of 2.575% on each of the four (4) Interest Payment Dates |
| Automatic Call: |
If on any Call Date, the closing level of each Underlying is greater than the applicable Starting Underlying Level, the notes will be automatically called. |
| Payment if Called: |
If the notes are automatically called, on the applicable Call Settlement Date, for each $1,000 principal amount note, you will receive $1,000 plus any accrued and unpaid interest to but excluding the applicable Call Settlement Date. |
| Protection Amount: |
With respect to the S&P 500® Index, 604.555, which is equal to 50.00% of the Starting Underlying Level of the S&P 500® Index. With respect to the Russell 2000® Index, 356.755, which is equal to 50.00% of the Starting Underlying Level of the Russell 2000® Index. |
| Pricing Date: |
September 15, 2011 |
| Settlement Date: |
On or about September 22, 2011 |
| Observation Date*: |
September 17, 2012 |
| Maturity Date*: |
September 24, 2012 |
| CUSIP: |
48125X2H8 |
| Monitoring Period: |
The period from but excluding the Pricing Date to and including the Observation Date |
| Interest Payment Dates: |
Unless previously called, interest on the notes will be payable quarterly in arrears on the Call Settlement Dates and the maturity date (each, an “Interest Payment Date”). See “Selected Purchase Considerations — Quarterly Interest Payments” in this pricing supplement for more information. |
| Payment at Maturity: |
If the notes are not automatically called, the payment at maturity, in excess of any accrued and unpaid interest, will be based on whether a Trigger Event has occurred and the performance of the Lesser Performing Underlying. If the notes are not automatically called, for each $1,000 principal amount note, you will receive $1,000 plus any accrued and unpaid interest at maturity, unless:
If the notes are not automatically called and the conditions described in (a) and (b) are satisfied, at maturity you will lose 1% of the principal amount of your notes for every 1% that the Ending Underlying Level of the Lesser Performing Underlying is less than the Starting Underlying Level of such Underlying. Under these circumstances, your payment at maturity per $1,000 principal amount note, in addition to any accrued and unpaid interest, will be calculated as follows: $1,000 + ($1,000 × Lesser Performing Underlying Return) You will lose some or all of your principal at maturity if the notes are not automatically called and the conditions described in (a) and (b) are both satisfied. |
| Trigger Event: |
A Trigger Event occurs if, at any time during the Monitoring Period, the Index level of either Underlying is less than the Starting Underlying Level of such Underlying by more than the applicable Protection Amount. |
| Underlying Return: |
With respect to each Underlying, the Underlying Return is calculated as follows: Ending
Underlying Level – Starting Underlying Level |
| Call Dates*: |
December 15, 2011 (first Call Date), March 15, 2012 (second Call Date) and June 15, 2012 (third Call Date) |
| Call Settlement Dates*: |
December 22, 2011 (first Call Settlement Date), March 22, 2012 (second Call Settlement Date) and June 22, 2012 (third Call Settlement Date) |
| Other Key Terms: |
See “Additional Key Terms” on the next page. |
| * |
Subject to postponement as described under “Description of Notes — Payment at Maturity” and “Description of Notes — Postponement of a Determination Date — Notes with a maturity of more than one year” in the accompanying product supplement no. 192-A-III and “Supplemental Terms of the Notes” in this pricing supplement. |
Investing in the Auto Callable Yield Notes involves a number of risks. See “Risk Factors” beginning on page PS-9 of the accompanying product supplement no. 192-A-III and “Selected Risk Considerations” beginning on page PS-5 of this pricing supplement.
Neither the SEC nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this pricing supplement or the accompanying prospectus supplement and prospectus. Any representation to the contrary is a criminal offense.
|
|
Price to Public (1) |
Fees and Commissions (2) |
Proceeds to Us |
| Per note |
$1,000 |
$25.33 |
$974.67 |
| Total |
$2,780,000 |
$70,417.40 |
$2,709,582.60 |
| (1) |
The price to the public includes the estimated cost of hedging our obligations under the notes through one or more of our affiliates. |
| (2) |
J.P. Morgan Securities LLC, which we refer to as JPMS, acting as agent for JPMorgan Chase & Co., will receive a commission of $25.33 per $1,000 principal amount note and will use a portion of that commission to allow selling concessions to other affiliated or unaffiliated dealers of $10.00 per $1,000 principal amount note. The concessions of $10.00 per $1,000 principal amount note include concessions to be allowed to selling dealers and concessions to be allowed to any arranging dealer. This commission includes the projected profits that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes. See “Plan of Distribution (Conflicts of Interest)” beginning on page PS-95 of the accompanying product supplement no. 192-A-III. |
The notes are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.
September 15, 2011
Additional Terms Specific to the Notes
You should read this pricing supplement together with the prospectus dated November 21, 2008, as supplemented by the prospectus supplement dated November 21, 2008 relating to our Series E medium-term notes of which these notes are a part, and the more detailed information contained in product supplement no. 192-A-III dated March 10, 2011. This pricing supplement, together with the documents listed below, contains the terms of the notes, supplements the term sheet related hereto dated September 15, 2011 and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in “Risk Factors” in the accompanying product supplement no. 192-A-III, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
-
Product supplement no. 192-A-III dated March 10, 2011:
http://www.sec.gov/Archives/edgar/data/19617/000089109211001693/e42021_424b2.pdf -
Prospectus supplement dated November 21, 2008:
http://www.sec.gov/Archives/edgar/data/19617/000089109208005661/e33600_424b2.pdf -
Prospectus dated November 21, 2008:
http://www.sec.gov/Archives/edgar/data/19617/000089109208005658/e33655_424b2.pdf
Our Central Index Key, or CIK, on the SEC website is 19617. As used in this pricing supplement, the “Company,” “we,” “us” and “our” refer to JPMorgan Chase & Co.
Additional Key Terms
| Starting Underlying Level: |
With respect to each Underlying, the closing level of such Underlying on the Pricing Date, which was 1209.11 for the S&P 500® Index and 713.51 for the Russell 2000® Index. |
| Ending Underlying Level: |
With respect to each Underlying, the closing level of such Underlying on the Observation Date |
| Lesser Performing Underlying: |
The Underlying with the Lesser Performing Underlying Return |
| Lesser Performing Underlying Return: |
The lower of the Underlying Return of the S&P 500® Index and the Underlying Return of the Russell 2000® Index |
Supplemental Terms of the Notes
For purposes of the notes offered by this pricing supplement:
(a) the information set forth under “Description of Notes — Payment upon Optional Call” in the accompanying product supplement no. 192-A-III is deemed to be deleted, and the notes will be automatically called as described under “Key Terms — Automatic Call” on the front cover of this pricing supplement. If the notes are automatically called on a Call Date, we will redeem each note and deliver the applicable cash payment described above on the applicable Call Settlement Date specified on the front cover of this pricing supplement, subject to postponement as described below. If a scheduled Call Settlement Date is not a business day, then that Call Settlement Date will be the next succeeding business day following the scheduled Call Settlement Date. If, due to a market disruption event or otherwise, a Call Date is postponed so that it falls less than three business days prior to the applicable scheduled Call Settlement Date, the applicable Call Settlement Date will be the third business day following the Call Date, as postponed. If an applicable Call Settlement Date is adjusted as the result of a market disruption event or otherwise, the payment of interest due on that Call Settlement Date will be made on that Call Settlement Date as adjusted, with the same force and effect as if the Call Settlement Date had not been adjusted, but no additional interest will accrue or be payable as a result of the delayed payment;
(b) all references in the accompanying product supplement no. 192-A-III to “Callable Yield Notes” will be deemed to refer to “Auto Callable Yield Notes” and all references to “Optional Call Dates” will be deemed refer to “Call Settlement Dates”;
(c) all references in “Certain U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 192-A-III to an “Optional Call” will be deemed to refer to an “Automatic Call”;
(d) the Call Dates are “Determination Dates” as described in the accompanying product supplement no. 192-A-III and are subject to postponement as described under “Description of Notes — Postponement of a Determination Date — Notes with a maturity of more than one year” in the accompanying product supplement no. 192-A-III; and
(e) the first paragraph set forth under “Description of Notes — Interest Payments” in the accompanying product supplement no. 192-A-III is deemed to be deleted. Instead, for each interest period, for each $1,000 principal amount note, the interest payment will be calculated as follows: $1,000 × interest rate (10.30%) × ¼.
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| JPMorgan
Structured Investments — |
PS-1 |
What Is the Total Return on the Notes at Maturity or Upon Automatic Call, Assuming a Range of Performances for the Lesser Performing Underlying?
The following table and examples illustrate the hypothetical total return on the notes at maturity or upon automatic call. The “note total return” as used in this pricing supplement is the number, expressed as a percentage, that results from comparing the payment at maturity or upon automatic call plus the interest payments received to and including the maturity date or the relevant Call Settlement Date, as applicable, per $1,000 principal amount note to $1,000. The table and examples below assume that the Lesser Performing Underlying is the S&P 500® Index and that the closing level of the Russell 2000® Index on each Call Date is greater than its Starting Underlying Level. We make no representation or warranty as to which of the Underlyings will be the Lesser Performing Underlying for purposes of calculating your actual payment at maturity, if applicable, or as to what the level of either Underlying will be on any Call Date. In addition, the following table and examples assume a Starting Underlying Level for the Lesser Performing Underlying of 1200 and reflect the Interest Rate of 10.30% per annum over the term of the notes and the Protection Amount of 50.00%. The hypothetical total returns and total payments set forth below are for illustrative purposes only and may not be the actual total returns or total payments applicable to a purchaser of the notes. The numbers appearing in the following table and examples have been rounded for ease of analysis.
| Ending
Underlying |
Lesser
Performing |
Note
Total |
Note
Total |
Note
Total |
| 2160.00 |
80.00% |
1st Call Settlement Date: 2.575% |
10.300% |
10.300% |
| 1980.00 |
65.00% |
10.300% |
10.300% |
|
| 1800.00 |
50.00% |
10.300% |
10.300% |
|
| 1680.00 |
40.00% |
10.300% |
10.300% |
|
| 1560.00 |
30.00% |
10.300% |
10.300% |
|
| 1440.00 |
20.00% |
10.300% |
10.300% |
|
| 1320.00 |
10.00% |
10.300% |
10.300% |
|
| 1260.00 |
5.00% |
10.300% |
10.300% |
|
| 1212.00 |
1.00% |
10.300% |
10.300% |
|
| 1200.00 |
0.00% |
N/A |
10.300% |
10.300% |
| 1140.00 |
-5.00% |
N/A |
10.300% |
5.30% |
| 1080.00 |
-10.00% |
N/A |
10.300% |
0.30% |
| 960.00 |
-20.00% |
N/A |
10.300% |
-9.70% |
| 900.00 |
-25.00% |
N/A |
10.300% |
-14.70% |
| 780.00 |
-35.00% |
N/A |
10.300% |
-24.70% |
| 720.00 |
-40.00% |
N/A |
10.300% |
-29.70% |
| 600.00 |
-50.00% |
N/A |
10.300% |
-39.70% |
| 599.88 |
-50.01% |
N/A |
N/A |
-39.71% |
| 480.00 |
-60.00% |
N/A |
N/A |
-49.70% |
| 360.00 |
-70.00% |
N/A |
N/A |
-59.70% |
| 240.00 |
-80.00% |
N/A |
N/A |
-69.70% |
| 120.00 |
-90.00% |
N/A |
N/A |
-79.70% |
| 0.00 |
-100.00% |
N/A |
N/A |
-89.70% |
(1) A Trigger Event occurs if the Index level of either Underlying is less than the Starting Underlying Level of such Underlying by more than 50.00% at any time during the Monitoring Period.
The following examples illustrate how the note total returns and total payments set forth in the table above are calculated.
Example 1: The level of the Lesser Performing Underlying increases from the Starting Underlying Level of 1200 to a closing level of 1212 on the first Call Date. Because the closing level of each Underlying on the first Call Date is greater than the applicable Starting Underlying Level, the notes are automatically called, and the investor receives a payment of $1,025.75 per $1,000 principal amount note, consisting of an interest payment of $25.75 per $1,000 principal amount note and a payment upon automatic call of $1,000 per $1,000 principal amount note.
Example 2: The level of the Lesser Performing Underlying decreases from the Starting Underlying Level of 1200 to a closing level of 1140 on the first Call Date and 1080 on the second Call Date and increases from the Starting Underlying Level of 1200 to a closing level of 1260 on the third Call Date. Although the level of the Lesser Performing Underlying on each of the first two Call Dates (1140 and 1080) is less than the Starting Underlying Level of 1200, because the closing level of each Underlying on the third Call Date is greater than the applicable Starting Underlying Level, the notes are automatically called, and the investor receives total payments of $1,077.25 per $1,000 principal amount note, consisting of interest payments of $77.25 per $1,000 principal amount note and a payment upon automatic call of $1,000 per $1,000 principal amount note.
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| JPMorgan
Structured Investments — |
PS-2 |
Example 3: The notes are not automatically called prior to maturity and the level of the Lesser Performing Underlying increases from the Starting Underlying Level of 1200 to an Ending Underlying Level of 1260. Because the notes are not automatically called prior to maturity and the Ending Underlying Level of the Lesser Performing Underlying of 1260 is greater than its Starting Underlying Level of 1200, regardless of whether a Trigger Event has occurred, the investor receives total payments of $1,103.00 per $1,000 principal amount note over the term of the notes, consisting of interest payments of $103.00 per $1,000 principal amount note over the term of the notes and a payment at maturity of $1,000 per $1,000 principal amount note. This represents the maximum total payment an investor may receive over the term of the notes.
Example 4: The notes are not automatically called prior to maturity, a Trigger Event has not occurred and the level of the Lesser Performing Underlying decreases from the Starting Underlying Level of 1200 to an Ending Underlying Level of 720. Because the notes are not called prior to maturity and a Trigger Event has not occurred, even though the Ending Underlying Level of the Lesser Performing Underlying of 720 is less than its Starting Underlying Level of 1200, the investor receives total payments of $1,103.00 per $1,000 principal amount note over the term of the notes, consisting of interest payments of $103.00 per $1,000 principal amount note over the term of the notes and a payment at maturity of $1,000 per $1,000 principal amount note. This represents the maximum total payment an investor may receive over the term of the notes.
Example 5: The notes are not automatically called prior to maturity, a Trigger Event has occurred and the level of the Lesser Performing Underlying decreases from the Starting Underlying Level of 1200 to an Ending Underlying Level of 720. Because the notes are not automatically called prior to maturity, a Trigger Event has occurred and the Ending Underlying Level of the Lesser Performing Underlying of 720 is less than its Starting Underlying Level of 1200, the investor receives total payments of $703.00 per $1,000 principal amount note over the term of the notes, consisting of interest payments of $103.00 per $1,000 principal amount note over the term of the notes and a payment at maturity of $600 per $1,000 principal amount note, calculated as follows:
[$1,000 + ($1,000 × -40%)] + $103.00 = $703.00
Example 6: The notes are not automatically called prior to maturity, a Trigger Event has occurred and the level of the Lesser Performing Underlying decreases from the Starting Underlying Level of 1200 to an Ending Underlying Level of 0. Because the notes are not automatically called prior to maturity, a Trigger Event has occurred and the Ending Underlying Level of the Lesser Performing Underlying of 0 is less than its Starting Underlying Level of 1200, the investor receives total payments of $103.00 per $1,000 principal amount note over the term of the notes, consisting solely of interest payments of $103.00 per $1,000 principal amount note over the term of the notes, calculated as follows:
[$1,000 + ($1,000 × -100%)] + $103.00 = $103.00
The hypothetical returns and the hypothetical payouts on the notes shown above do not reflect fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the hypothetical total returns and payouts shown above would likely be lower.
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| JPMorgan
Structured Investments — |
PS-3 |
Selected Purchase Considerations
- THE NOTES OFFER A HIGHER INTEREST RATE THAN THE YIELD ON DEBT SECURITIES OF COMPARABLE MATURITY ISSUED BY US OR AN ISSUER WITH A COMPARABLE CREDIT RATING — The notes will pay interest at a rate of 10.30% per annum over the term of the notes, which is higher than the yield currently available on debt securities of comparable maturity issued by us or an issuer with a comparable credit rating. Because the notes are our senior unsecured obligations, any interest payment or any payment at maturity is subject to our ability to pay our obligations as they become due.
- QUARTERLY INTEREST PAYMENTS — The notes offer quarterly interest payments at a rate of 10.30% per annum over the term of the notes. Unless previously called, interest on the notes will be payable quarterly in arrears at a rate of 2.575% on the Call Settlement Dates and the maturity date (each, an “Interest Payment Date”). Interest will be payable to the holders of record at the close of business on the business day immediately preceding the applicable Interest Payment Date. If an Interest Payment Date is not a business day, payment will be made on the next business day immediately following such day, but no additional interest will accrue as a result of the delayed payment.
- POTENTIAL EARLY EXIT AS A RESULT OF THE AUTOMATIC CALL FEATURE — If the closing level of each Underlying is greater than the applicable Starting Underlying Level on any of the three (3) Call Dates, your notes will be automatically called prior to the maturity date. Under these circumstances, on the applicable Call Settlement Date, for each $1,000 principal amount note, you will receive $1,000 plus accrued and unpaid interest to but excluding the applicable Call Settlement Date.
- THE NOTES DO NOT GUARANTEE THE RETURN OF YOUR PRINCIPAL IF THE NOTES ARE NOT AUTOMATICALLY CALLED — If the notes are not automatically called, we will pay you your principal back at maturity so long as a Trigger Event has not occurred or the Ending Underlying Level of each Underlying is not less than its Starting Underlying Level. A Trigger Event occurs if, at any time during the Monitoring Period, the Index level of any Underlying is less than the Starting Underlying Level of such Underlying by more than the applicable Protection Amount. However, if the notes are not automatically called, a Trigger Event has occurred and the Ending Underlying Level of either Underlying is less than the Starting Underlying Level of such Underlying, you could lose the entire principal amount of your notes.
- EXPOSURE TO EACH OF
THE UNDERLYINGS — The return on the notes is linked to the Lesser Performing
Underlying, which will be either the S&P 500® Index or the
Russell 2000® Index.
The S&P 500® Index consists of 500 component stocks selected to provide a performance benchmark for the U.S. equity markets. For additional information on the S&P 500® Index, see the information set forth under “The S&P 500® Index” in the accompanying product supplement no. 192-A-III.
The Russell 2000® Index consists of the middle 2,000 companies included in the Russell 3000™ Index and, as a result of the index calculation methodology, consists of the smallest 2,000 companies included in the Russell 3000® Index. The Russell 2000® Index is designed to track the performance of the small capitalization segment of the U.S. equity market. For additional information on the Russell 2000® Index, see the information set forth under “The Russell 2000® Index” in the accompanying product supplement no. 192-A-III. - TAX TREATMENT AS A UNIT COMPRISING A PUT OPTION AND A DEPOSIT — You should review carefully the section entitled “Certain U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 192-A-III. By purchasing the notes, you agree (in the absence of an administrative determination or judicial ruling to the contrary) to treat (i) the notes for U.S. federal income tax purposes as units comprising: (x) a Put Option written by you that is terminated if an Automatic Call occurs and that, if not terminated, in circumstances where the payment at maturity is less than $1,000 (excluding accrued and unpaid interest) requires you to pay us an amount equal to $1,000 multiplied by the absolute value of the Lesser Performing Underlying Return and (y) a Deposit of $1,000 per $1,000 principal amount note to secure your potential obligation under the Put Option and (ii) approximately 9.51% of each interest payment as interest on the Deposit and the remainder as Put Premium. We will follow this approach in determining our information reporting responsibilities, if any. Assuming the treatment and allocation described above is respected, amounts treated as interest on the Deposit will be taxed as ordinary income, while the Put Premium will not be taken into account prior to sale or settlement, including a settlement following an Automatic Call. However, there are other reasonable treatments that the Internal Revenue Service (the “IRS”) or a court may adopt, in which case the timing and character of any income or loss on the notes could be significantly and adversely affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. While it is not clear whether the notes would be viewed as similar to the typical prepaid forward contract described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the notes, possibly with retroactive effect. The notice focuses on a number of issues, the most relevant of which for holders of the notes are the character of income or loss (including whether the Put Premium might be currently included as ordinary income) and the degree, if any, to which income realized by Non-U.S. Holders should be subject to withholding tax. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the notes, including possible alternative treatments and the issues presented by this notice. Non-U.S. Holders should also note that they may be withheld upon at a rate of up to 30% unless they have submitted a properly completed IRS Form W-8BEN or otherwise satisfied the applicable documentation requirements. Purchasers who are not initial purchasers of notes at the issue price should also consult their tax advisers with respect to the tax consequences of an investment in the notes, including possible alternative treatments, as well as the allocation of the purchase price of the notes between the Deposit and the Put Option.
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| JPMorgan
Structured Investments — |
PS-4 |
Selected Risk Considerations
An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in either or both of the Underlyings or any of the equity securities included in the Underlyings. These risks are explained in more detail in the “Risk Factors” section of the accompanying product supplement no. 192-A-III dated March 10, 2011.
- YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS — The notes do not guarantee any return of principal. If the notes are not automatically called, we will pay you your principal back at maturity only if a Trigger Event has not occurred or the Ending Underlying Level of each Underlying is equal to or greater than the Starting Underlying Level of such Underlying. If the notes are not automatically called, a Trigger Event has occurred and the Ending Underlying Level of either Underlying is less than the Starting Underlying Level of such Underlying, you will lose 1% of your principal amount at maturity for every 1% that the Ending Underlying Level of the Lesser Performing Underlying is less than the Starting Underlying Level of such Underlying. Accordingly, you could lose up to the entire principal amount of your notes.
- CREDIT RISK OF JPMORGAN CHASE & CO. — The notes are subject to the credit risk of JPMorgan Chase & Co. and our credit ratings and credit spreads may adversely affect the market value of the notes. Investors are dependent on JPMorgan Chase & Co.’s ability to pay all amounts due on the notes at maturity or on any Call Settlement Date and on the Interest Payment Dates, and therefore investors are subject to our credit risk and to changes in the market’s view of our creditworthiness. Any decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the value of the notes.
- POTENTIAL CONFLICTS — We and our affiliates play a variety of roles in connection with the issuance of the notes, including acting as calculation agent. In performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the notes. In addition, we are currently one of the companies that make up the S&P 500® Index. We will not have any obligation to consider your interests as a holder of the notes in taking any corporate action that might affect the value of the S&P 500® Index and the notes.
- YOUR RETURN ON THE NOTES IS LIMITED TO THE PRINCIPAL AMOUNT PLUS ACCRUED INTEREST REGARDLESS OF ANY APPRECIATION IN THE VALUE OF EITHER UNDERLYING — If the notes are not automatically called, a Trigger Event has not occurred and the Ending Underlying Level of either Underlying is not below the Starting Underlying Level of such Underlying, for each $1,000 principal amount note, you will receive $1,000 at maturity plus any accrued and unpaid interest, regardless of any appreciation in the value of either Underlying, which may be significant. If the notes are automatically called, for each $1,000 principal amount note, you will receive $1,000 on the applicable Call Settlement Date plus any accrued and unpaid interest, regardless of the appreciation in the value of the Underlyings, which may be significant. Accordingly, the return on the notes may be significantly less than the return on a direct investment in either Underlying during the term of the notes.
- YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE CLOSING LEVEL AND INDEX LEVEL OF EACH UNDERLYING — Your return on the notes and your payment at maturity, if any, is not linked to a basket consisting of the Underlyings. If the notes are not automatically called, your payment at maturity is contingent upon the performance of each individual Underlying such that you will be equally exposed to the risks related to both of the Underlyings. Poor performance by either of the Underlyings over the term of the notes may negatively affect your payment at maturity and will not be offset or mitigated by positive performance by the other Underlying. Accordingly, your investment is subject to the risk of decline in the closing level and Index level of each Underlying.
- THE BENEFIT PROVIDED BY THE PROTECTION AMOUNT MAY TERMINATE AT ANY TIME DURING THE MONITORING PERIOD — If the notes are not automatically called prior to maturity and, at any time during the Monitoring Period, the Index level of either Underlying is less than the Starting Underlying Level of such Underlying by more than the applicable Protection Amount, a Trigger Event will occur, and you will be fully exposed to any depreciation in the Lesser Performing Underlying. We refer to this feature as a contingent buffer. Under these circumstances, and if the Ending Underlying Level of either Underlying is less than the Starting Underlying Level for such Underlying, you will lose 1% of the principal amount of your investment for every 1% that the Ending Underlying Level of the Lesser Performing Underlying is less than its Starting Underlying Level. You will be subject to this potential loss of principal even if the relevant Underlying subsequently recovers such that the Index level is less than the Starting Underlying Level of such Underlying by less than the applicable Protection Amount. If these notes had a non-contingent buffer feature, under the same scenario, you would have received the full principal amount of your notes plus accrued and unpaid interest at maturity. As a result, your investment in the notes may not perform as well as an investment in a security with a return that includes a non-contingent buffer.
- YOUR PAYMENT AT MATURITY MAY BE DETERMINED BY THE LESSER PERFORMING UNDERLYING — If the notes are not automatically called and a Trigger Event occurs, you will lose some or all of your investment in the notes if the Ending Underlying Level of either Underlying is below the Starting Underlying Level. This will be true even if the Ending Underlying Level of the other Underlying is greater than or equal to its Starting Underlying Level. The two Underlyings’ respective performances may not be correlated and, as a result, if the notes are not automatically called, you may receive the principal amount of your notes at maturity only if there is a broad-based rise in the performance of U.S. equities during the term of the notes.
- THE AUTOMATIC CALL FEATURE MAY FORCE A POTENTIAL EARLY EXIT — If the notes are automatically called, the amount of interest payable on the notes will be less than the full amount of interest that would have been payable if the notes were held to maturity, and, for each $1,000 principal amount note, you will receive $1,000 plus accrued and unpaid interest to but excluding the applicable Call Settlement Date.
- REINVESTMENT RISK — If your notes are automatically called, the term of the notes may be reduced to as short as three months and you will not receive interest payments after the applicable Call Settlement Date. There is no
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PS-5 |
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guarantee
that you would be able to reinvest the proceeds from an investment in the notes
at a comparable return and/or with a comparable interest rate for a similar
level of risk in the event the notes are automatically called prior to the Maturity
Date.
- CERTAIN BUILT-IN COSTS
ARE LIKELY TO AFFECT ADVERSELY THE VALUE OF THE NOTES PRIOR TO MATURITY — While the payment at maturity, if any, or upon an automatic
call described in this pricing supplement is based on the full principal amount
of your notes, the original issue price of the notes includes the agent’s
commission and the estimated cost of hedging our obligations under the notes.
As a result, and as a general matter, the price, if any, at which JPMS will
be willing to purchase notes from you in secondary market transactions, if
at all, will likely be lower than the original issue price and any sale prior
to the maturity date could result in a substantial loss to you. This secondary
market price will also be affected by a number of factors aside from the agent’s
commission and hedging costs, including those referred to under “Many Economic
and Market Factors Will Influence the Value of the Notes” below.
The notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your notes to maturity. - PROTECTION AMOUNT APPLIES ONLY IF YOU HOLD THE NOTES TO MATURITY — Assuming the notes are not automatically called, we will pay you your principal back at maturity only if the Index level of each Underlying is not less than its Starting Underlying Level by more than the applicable Protection Amount at any time during the Monitoring Period or the Ending Underlying Level of each Underlying is equal to or greater than the Starting Underlying Level of such Underlying. If the notes are not automatically called and a Trigger Event has occurred, you will be fully exposed at maturity to any decline in the value of the Lesser Performing Underlying.
- VOLATILITY RISK — Greater expected volatility with respect to an Underlying indicates a greater likelihood as of the Pricing Date that the Index level for such Underlying could fall below its Starting Underlying Level by more than the applicable Protection Amount at any time during the Monitoring Period. An Underlying’s volatility, however, can change significantly over the term of the notes. The Index level of an Underlying could fall sharply at any time during the Monitoring Period, which could result in a significant loss of principal.
- AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION STOCKS — The stocks that constitute the Russell 2000® Index are issued by companies with relatively small market capitalization. The stock prices of smaller companies may be more volatile than stock prices of large capitalization companies. Small capitalization companies may be less able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. Small capitalization companies are less likely to pay dividends on their stocks, and the presence of a dividend payment could be a factor that limits downward stock price pressure under adverse market conditions.
- LACK OF LIQUIDITY — The notes will not be listed on any securities exchange. JPMS intends to offer to purchase the notes in the secondary market but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the notes easily. Because other dealers are not likely to make a secondary market for the notes, the price at which you may be able to trade your notes is likely to depend on the price, if any, at which JPMS is willing to buy the notes.
- NO DIVIDEND PAYMENTS OR VOTING RIGHTS — As a holder of the notes, you will not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of the securities included in the Underlyings would have.
- HEDGING AND TRADING IN THE UNDERLYINGS — While the notes are outstanding, we or any of our affiliates may carry out hedging activities related to the notes, including the equity securities included in the Underlyings. We or our affiliates may also trade in the equity securities included in the Underlyings from time to time. Any of these hedging or trading activities as of the Pricing Date and during the term of the notes could adversely affect the likelihood of an automatic call or our payment to you at maturity. It is possible that such hedging activities or trading activities could result in substantial returns for us or our affiliates while the value of the notes declines.
- MANY ECONOMIC AND
MARKET FACTORS WILL INFLUENCE THE VALUE OF THE NOTES — In
addition to the levels of the Underlyings on any day, the value of the notes
will be affected by a number of economic and market factors that may either
offset or magnify each other, including:
- whether a Trigger Event has occurred;
- the interest rate on the notes;
- the expected volatility of the Underlyings;
- the time to maturity of the notes;
- the likelihood of an automatic call being triggered;
- the dividend rates on the equity securities included in the Underlyings;
- the expected positive or negative correlation between the S&P 500® Index and the Russell 2000® Index, or the expected absence of any such correlation;
- interest and yield rates in the market generally as well as in the markets of the equity securities included in the Underlyings;
- a variety of economic, financial, political, regulatory and judicial events; and
- our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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PS-6 |
Historical Information
The following graphs show the historical weekly performance of the S&P 500® Index and the Russell 2000® Index from January 6, 2006 through September 9, 2011. The closing level of the S&P 500® Index on September 15, 2011 was 1209.11. The closing level of the Russell 2000® Index on September 15, 2011 was 713.51.
We obtained the various closing levels of the Underlyings below from Bloomberg Financial Markets. We make no representation or warranty as to the accuracy or completeness of information obtained from Bloomberg Financial Markets. The historical levels of each Underlying should not be taken as an indication of future performance, and no assurance can be given as to the closing level of any Underlying on the Observation Date or the Index level of any Underlying at any time during the Monitoring Period. We cannot give you assurance that the performance of the Underlyings will result in the return of any of your initial investment.
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PS-7 |
Supplemental Plan of Distribution
We expect that delivery of the notes will be made against payment for the notes on or about the settlement date set forth on the front cover of this term sheet, which will be the fifth business day following the Pricing Date of the notes (this settlement cycle being referred to as T+5). Under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in three business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes on the Pricing Date or the succeeding business day will be required to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement and should consult their own advisors.
Validity of the Notes
In the opinion of Davis Polk & Wardwell LLP, as our special products counsel, when the notes offered by this pricing supplement have been executed and issued by us and authenticated by the trustee pursuant to the indenture, and delivered against payment as contemplated herein, such notes will be our valid and binding obligations, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith), provided that such counsel expresses no opinion as to the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above. This opinion is given as of the date hereof and is limited to the federal laws of the United States of America, the laws of the State of New York and the General Corporation Law of the State of Delaware. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the indenture and its authentication of the notes and the validity, binding nature and enforceability of the indenture with respect to the trustee, all as stated in the letter of such counsel dated March 23, 2011, which has been filed as an exhibit to a Current Report on Form 8-K by us on March 23, 2011.
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Structured Investments — |
PS-8 |